March 13, 2011

Nordea confused by tax law amendment

The amendment in question concerns Estonian representative offices of foreign companies or so-called affiliates and taxation of their dividends.

Until now, such representative offices like Nordea in Estonia were taxed when the amount of dividends they paid to their parent company exceeded the amount that the parent company had invested in Estonia

However, under an amendment that took force in January 2011, they will be taxed at the moment they are paying out dividends to their parent company.

According to Nordea, the amendment seems to create a retroactive tax claim on dividends paid out by 2011. To avoid the risk of facing a large tax claim with interest, the bank on its own initiative transferred 8 million euros to the account of the Estonian tax authority and is demanding an explanation from the finance ministry.

It seems to be a case of bad wording of the law and the finance ministry has already informed the bank that there will be no retroactive tax claim.